TVG-Magna Negotiations at Impasse Over Exclusive Contracts

Talks between Magna Entertainment and the TV Games Network are over, according to TVG president Mark Wilson, who has been negotiating with Magna chief executive officer James McAlpine in hopes of striking a deal to bring Santa Anita, Gulfstream Park, and other Magna tracks to TVG's racing and wagering network.

Wilson said the sticking point is that McAlpine and Magna chairman Frank Stronach insist on the elimination of contracts between TVG and racetracks that give TVG exclusive rights to broadcast a track's races. McAlpine told The Blood-Horse that Magna is asking only to exchange "reciprocal rights" that would permit the two companies to share content and wagering rights on a non-exclusive basis. "We don't think exclusivity does serve the best interests of the horse industry," McAlpine said.

"TVG has put our money where our mouth is," Wilson said. "We have distribution. We have a dedicated channel for racing that produces quality programming, and we have patents. We'd love to show Stronach's races and would happily pay, but we simply are not going to give him our content that was the basis of our investment of over $150 million. That's not free enterprise. That's free riding, and no business would do something that detrimental to its shareholders' interests and the interests of the industry."

Wilson called racing a "niche sport" that can not support two full-time television networks. "Look at golf," he said. "That is the third or fourth most popular sport, and it just has The Golf Channel. Racing is the 13th or 14th most popular sport."

Wilson also believes TVG "can grow the market dramatically in the future." But he said it will take TVG's distribution and marketing power to move the sport beyond a niche. Two of TVG's biggest financial backers are media giant Rupert Murdoch and cable mogul John Malone. "To achieve this goal," Wilson said, "there is only room for one television channel for racing today and diluting that effort will only keep racing from ever growing beyond a niche."

McAlpine disagreed, saying Magna feels there is room for a second racing network. "If the industry is just three million people, I'd agree," McAlpine said. "You have to be going into this believing there is a market beyond the three million customers. That being said, there is a huge market to grow into."

"We made our business decision and it was to accumulate content and then add technology to the content to distribute it to the public," McAlpine continued. "We are more than happy to share our content with other participants who will do the same. We will do it on a non-exclusive basis.

"We are developing a satellite distribution that will be similar in nature to things that we've seen in the past," McAlpine said, "and we are also endeavoring to obtain cable carriage of our channel. You start where you can get it and where the biggest priority is, and that's in California. We broadcast on Fox (an hourly show most racing days on Fox Sports West and Fox Sports West2) from Santa Anita, and we also have a show out of Pittsburgh on analog cable. We have production capability at three of our tracks."

Before the end of the current meeting, McAlpine predicted Magna would have Santa Anita races available by satellite, similar to the Racing Network service, co-owned by Magna, that failed last year.

Thomas Meeker, chief executive officer of Magna rival Churchill Downs Inc., whose tracks have contracts with TVG, said exclusivity was "an important ingredient for the industry" to attract the investment of TVG's parent company.

"The fact is," Meeker said, "we've got a major international company to invest in our industry, and clearly they would not have done it without buying the exclusive rights to various properties. That's not uncommon. NBC certainly wouldn't want us to give our signal to ABC for the Kentucky Derby. That's just the facts of life."

Meeker said ongoing digital technology has expanded racing's opportunities to go beyond a single platform. The fan of the future could have true interactivity, Meeker said, creating his own programming and accessing data through a set-top box or a chip imbedded in a television. "From a long-term perspective, it would be best for the industry to have a common direction, and we ought to marshal our resources to get that accomplished," he said.

But the Churchill executive cautioned that the current dispute could have a negative impact on racing's fan base. "The guy we should be thinking about is the customer," Meeker said. "The time has come for us to holster our guns, take a deep breath, and ask the question, 'Whatever it is that we're doing, what impact is this going to have on the customer?' If we lose the customer, it won't make a lick of difference which direction we take."